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Reliance sales up 37 per cent in first quarter

Syed Firdaus Ashraf in Bombay

In a recession-hit market, Reliance Industries Limited lived up to its reputation by achieving a 37 per cent increase in sales and an 18 per cent growth in net profit in the first quarter of 1998-99.

The company has announced sales of Rs 36.45 billion (US $ 858 million) and a net profit of 4.41 billion (US $ 104 million).

Speaking to media-persons, joint managing director Anil Ambani said that in spite of a negative external environment, the company had consistently achieved growth. It has been able to pursue and deliver value and its businesses have been fundamentally strong, he said.

The earnings per share were up 16 per cent to Rs 4.7 (US $0.11) and the cash earnings per share rose 25 per cent, a gain of Rs 6.8 (US $ 0.16).

"Slowdown in economic growth in Asia continued and the business confidence remained low. But we at Reliance were able to achieve a good result against all this backdrop," Ambani said. Production volumes increased by 63 per cent from 1.05 million tonnes to 1.7 million tonnes.

Asked whether Hazira petrochemicals complex was operating at full capacity, he said, "All our plants, including 17 new plants commissioned at the Hazira, operated at rated capacity for the full quarter."

However, he clarified by stating that many of the new plants were commissioned in the second half of the last financial year. The first quarter production growth number of 63 per cent is, to that extent, not representative of the likely production growth number for the full year.

On the export front too, revenues increased nearly four times to Rs 1.7 billion (US $ 40 million).

Commenting on the southeast Asian crisis, Ambani said, "Over-leveraging and reckless financial management have caused the collapse of several leading companies in the region. So, we at Reliance have been cautious to follow extremely conservative financial policies."

Expressing his views on sanctions imposed on India, he said, "The sanctions had no material impact in terms of availability of funds to Reliance since our company is not in the borrowing market."

He backed his argument saying that Moody's downgrading of India's rating by two notches would not affect Reliance. He said Reliance is constrained by the sovereign ceiling since all funding for the company's Jamnagar project had already come in.

Projecting his outlook for 1998-99, he said, "Volume growth, higher value integration, focus on quality, productivity, costs and efficiencies, will remain the key earnings drivers for the future."

Reliance estimates that production volumes will increase 5-10 per cent from 5.2 million tonnes in 1997-98 to 5.5-5.8 million tonnes in 1998-99.

However, based on the first quarter performance, Ambani revised the earlier targets and said he was confident of achieving volumes of six million tonnes for a full-year growth of over 15 per cent.

"We remain on track to achieve our targeted production volumes of 8 to 8.5 million tonnes in the year 1999-2000, and 8.5 to 9 million tonnes by 2000-2001," Ambani said.

Commenting on the recent Gujarat cyclone, he said that it had no material impact on the cost and schedule of these projects.